Ruby Company produces a chair that requires 4 yards of material per unit. The standard price of one yard of material is $12.20. During the month, 5,600 chairs were manufactured, using 22,600 yards at a cost of $11.47 per yard. Determine the following: Enter favorable variances as negative numbers. a. Price Variance b. Quantity Variance c. Cost Variance
a. Material Price Variance | $ (16,498) | favorable |
b. Material Quantity Variance | $ 2,440 | unfavorable |
c. Material Cost Variance | $ (14,058) | favorable |
MATERIAL PRICE VARIANCE (MPV) | ||
Actual Quantity (AQ) | 22,600 yards | a |
Actual Price (AP) | $11.47 | b |
Actual Cost | $259,222.00 | c = a × b |
Standard Price (SP) | $12.20 | d |
Actual Quantity (AQ) | 22,600 yards | e |
Standard Cost of Actual Quantity | $275,720.00 | f = d × e |
Material Price Variance | $(16,498.00) | c - f |
Alternatively; MPV = AQ × (SP - AP) = 22,600 yards × ($12.20 - $11.47) = $16,498 (favorable)
MATERIAL QUANTITY VARIANCE (MQV) | ||
Actual Quantity (AQ) | 22,600 yards | a |
Standard Price (SP) | $12.20 | b |
Standard Cost of Actual Quantity | $275,720.00 | c = a × b |
Standard Quantity per chair | 4 yards | d |
Actual production of chairs | 5,600 chairs | e |
Total Standard Quantity (SQ) | 22,400 yards | f = d × e |
Standard Price (SP) | $12.20 | g |
Standard Cost of Standard Quantity for Actual production | $273,280.00 | h = f × g |
Material Quantity Variance | $2,440.00 | c - h |
Alternatively; MQV = SP × (SQ - AQ) = $12.20 × (22,400 yards - 22,600 yards) = $ (2,440) unfavorable (more yards of material used than the specified standards)
MATERIAL COST VARIANCE | ||
Actual Quantity (AQ) | 22,600 yards | a |
Actual Price (AP) | $11.47 | b |
Actual Cost | $259,222.00 | c = a × b |
Standard Quantity per chair | 4 yards | d |
Actual production of chairs | 5,600 chairs | e |
Total Standard Quantity (SQ) | 22,400 yards | f = d × e |
Standard Price (SP) | $12.20 | g |
Standard Cost | $273,280.00 | h = f × g |
Material Cost Variance | $ (14,058.00) | c - h |
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